A renewal warranty on a PI policy is a contractual representation by the insured firm that something is, or will be, true. Common warranties at PI renewal cover the absence of known circumstances, continued operation of procedures (such as conflict checks or supervision), and the accuracy of fee-income figures. Under the Insurance Act 2015, the insurer’s remedies for warranty breach are narrower than they used to be — the warranty must be material and connected to the loss for the insurer to escape the claim.
What renewal warranties mean in PI insurance
A warranty in insurance law is a term of the contract that the insured promises to be true (a present warranty) or to keep true (a continuing warranty). Historically, breach of warranty gave the insurer a powerful remedy: the policy was discharged from the date of breach, regardless of whether the breach was material to the eventual loss. The Insurance Act 2015, which came into force on 12 August 2016, reformed this position for non-consumer commercial insurance, replacing the old strict regime with one that requires a connection between the breach and the loss.
At PI renewal the firm normally signs a renewal proposal form or renewal declaration that contains some combination of:
- A representation that no circumstance has arisen that could give rise to a claim, beyond those already notified.
- Confirmation of fee income, headcount, work-type mix and other underwriting facts.
- A declaration that internal procedures (conflict checks, file supervision, money-handling controls, professional clearances) continue to operate.
- An acknowledgment of the duty of fair presentation under the Insurance Act 2015.
Some of these statements are warranties — strict promises that bind the firm contractually. Others are representations falling under the duty of fair presentation, which has its own framework. The label matters less than the function: in both cases, getting the answer wrong has consequences.
How renewal warranties work in practice
Materiality test. Under the Insurance Act 2015, an insurer cannot rely on a warranty breach to escape a claim unless compliance with the warranty would have prevented or reduced the loss. So if a firm warrants its supervision procedures, then breaches the warranty by failing to review a file, the insurer can only avoid the claim if the supervision breach was connected to the loss. A claim on an unrelated matter is not affected.
Suspensive effect. Under the Act, breach of warranty suspends the insurer’s liability from the date of breach until the date of remedy, rather than discharging the policy entirely. If the breach is remedied — for example, supervision procedures are reinstated — cover resumes for claims arising after the remedy.
Contracting out. The Insurance Act framework is the default for non-consumer commercial insurance, but the parties can contract out of certain provisions if the insurer takes specified steps to draw the change to the insured’s attention. Some PI wordings contain “transparency clauses” that flag terms the insurer says it has carried over from the pre-Act regime. Brokers should be reading these carefully.
Duty of fair presentation. Separate from warranties is the duty of fair presentation — the firm’s obligation to disclose every material circumstance it knows or ought to know, and to make a presentation reasonably clear and accessible to a prudent underwriter. Failure of fair presentation can give the insurer remedies ranging from proportionate reduction of cover (for innocent or negligent breach) to avoidance (for deliberate or reckless breach). See our utmost good faith / fair presentation definition.
Circumstance warranties. Almost every PI renewal proposal contains a warranty that no circumstance is known that could give rise to a claim, other than those disclosed. This is the most common warranty in PI and the most common source of dispute. A firm that knows of a problem and does not disclose it at renewal risks a coverage decline on any later claim arising from that problem.
Worked example with realistic numbers
A four-partner accountancy practice carries PI cover at £500,000 each and every claim with a £2,500 excess on £400,000 fee income. At renewal in April, the firm completes the renewal proposal. One audit client raised concerns three months earlier about the firm’s handling of a tax computation that has since produced a £55,000 HMRC liability. The partner who handled the file did not flag it internally and the renewal proposal is signed by the managing partner who knew nothing about it.
In November the client makes a formal claim for £55,000 plus interest. The PI insurer reviews the file and finds the November claim arises from a circumstance the firm knew about in January. The renewal proposal contained a warranty that no such circumstance was known.
Under the Insurance Act 2015, the insurer’s remedy depends on materiality and on the nature of the non-disclosure. If the non-disclosure is deliberate or reckless, the insurer can avoid the policy and return premium. If negligent or innocent, the remedy is proportionate — what the insurer would have done if the truth had been disclosed (charged more, applied a sub-limit, declined). The insurer may decline the claim entirely, settle on a reduced basis, or pay subject to a higher excess imposed retrospectively.
In practice many insurers in this scenario will pay the claim if the firm can show the non-disclosure was negligent rather than deliberate (the partner forgot to flag it, the managing partner did not know). They will then either uplift the renewal premium going forward, decline to renew, or apply an additional excess. The firm pays the £2,500 excess and the insurer pays £55,000 less any retrospective adjustment.
If the firm had disclosed the circumstance at renewal, the insurer might have applied a £15,000 retro-active excess on claims arising from that file. The firm would have known the position up front and could have planned for it.
When this matters most
Renewal warranties matter every year at renewal but most acutely in these situations.
When a circumstance is known but not yet a claim. The single biggest source of PI coverage disputes is failure to notify a known circumstance at renewal. Anything that has the smell of a complaint — a client query, an HMRC enquiry, a regulatory letter, an internal review — should be reviewed before the renewal proposal is signed. A circumstance disclosed at renewal is captured by the existing policy; a circumstance not disclosed risks being uninsured.
When the firm is changing structure. A change from sole practitioner to LLP, or LLP to limited company, brings with it changes to the renewal proposal that need to be made carefully. The new entity may not benefit from the old policy’s retroactive cover; warranties about historic procedures need to be expressed correctly.
When key personnel are leaving. Departing partners often take client relationships with them. Files may not be in good order, and the departing partner may have knowledge of problems that the remaining partners do not. The renewal proposal should reflect what the firm actually knows, which may require active enquiry of departing personnel before they walk out.
When fee income has changed substantially. Most insurers warrant fee income at the upcoming year’s expected level. A material under-statement (intentional or not) can lead to a coverage dispute if the firm grew significantly during the year without notifying.
When new work types have been taken on. A firm’s PI is rated to its declared activity mix. Taking on a new area — say, expert witness work, or M&A advisory — without flagging it at renewal can be a fair-presentation issue and may also breach an activity warranty.
Common variations and market wording
“All circumstances known to any partner or director” — versus — “circumstances within the knowledge of the signatory.” Some wordings broaden the warranty to capture knowledge across the firm; others limit it to what the signing officer knows. The broader form is harder to comply with, especially for larger firms, and requires real internal canvass before sign-off.
“Will continue to operate” supervision and conflict procedures. Continuing warranties of this kind sit alongside the present-tense warranty of the firm’s current procedures. If a procedure lapses mid-year — say, a partner stops the conflict check that had been part of the warranted procedure — the insurer’s suspensive remedy kicks in from the date of lapse.
Fee-income warranties. Some wordings warrant the prior year’s fee income (a fact) and the upcoming year’s estimated fee income (a forecast). The factual warranty is binary; the forecast is judged against reasonableness at the time. Materially understating the forecast to lower the premium is a foreseeable problem.
Sub-limit triggers. Some renewal warranties trigger a sub-limit if a particular activity is not warranted out — for example, a £250,000 sub-limit on construction-related advice unless the firm specifically warrants it does no such work. The detail in the proposal form schedules matters.
Conditions precedent. A few wordings still cast renewal terms as conditions precedent to liability rather than warranties, on the basis that conditions precedent are treated more strictly. Whether this label survives challenge under the Insurance Act 2015 depends on the wording.
Related concepts
Renewal warranties sit alongside the duty of fair presentation / utmost good faith and the practical mechanics of circumstance notification. For solicitors specifically, the SRA Minimum Terms and Conditions sharply limit the insurer’s ability to use warranty breach as a reason not to pay an innocent claimant, even where the firm is on the hook for the consequences.
Frequently asked questions
What is a warranty on a PI insurance policy?
A warranty is a contractual promise by the insured firm that something is, or will continue to be, true. Common PI warranties include statements that no known circumstance exists, that internal procedures operate, and that fee income and activity mix are as stated. Breach of a warranty gives the insurer remedies under the Insurance Act 2015, including suspending cover and (where the breach is connected to the loss) declining the claim.
Does the Insurance Act 2015 change warranty law?
Yes. The Insurance Act 2015, in force from August 2016, replaced the strict pre-Act warranty regime for non-consumer commercial insurance. Breach now suspends the insurer’s liability until remedy, and an insurer can decline a claim for breach only where compliance with the warranty would have prevented or reduced the loss. The Act applies as default but parties can contract out of certain provisions if the insurer flags the change clearly.
What is the difference between a warranty and a representation?
A warranty is a contractual promise; a representation is a statement made to induce the contract. Warranty breach engages the Insurance Act suspensive remedy; representation issues engage the duty of fair presentation framework with its proportionate remedies. The label matters because the analytical route differs, but both can result in declined claims if the firm’s disclosure is inaccurate.
What should I do if I find a circumstance just before renewal?
Notify it before signing the renewal proposal. A circumstance notified to the expiring policy is captured by that policy under the claims-made trigger; the renewing policy then starts with no exposure to it. A circumstance discovered but not notified before signing the proposal becomes a non-disclosure and may not be covered by either policy. Speed matters here; talk to your broker before the renewal effective date.
Can my insurer avoid the policy for warranty breach?
Only in narrow circumstances under the Insurance Act 2015. The insurer can decline a claim where the warranty breach is connected to the loss and was unremedied at the time of loss. Pure avoidance of the policy from inception requires deliberate or reckless non-disclosure or misrepresentation, not mere warranty breach. The remedies are more limited than they used to be, but warranty breach is still a real risk to coverage.
Does the SRA MTC override warranty breach for solicitors?
Largely, yes. The SRA MTC includes a non-avoidance provision that prevents the insurer using warranty breach or non-disclosure to refuse a claim by an innocent claimant. The insurer pays the claim and then pursues the firm for recoveries. So in solicitors’ PI the warranty regime affects the firm’s relationship with the insurer (premium uplift, retro adjustments, recoveries) more than the claimant’s position. See our SRA MTC definition.
What’s the difference between “any partner’s knowledge” and “the signatory’s knowledge”?
A warranty extending to knowledge of any partner or director requires real internal canvass before sign-off — the signing officer needs to confirm with each partner that no known circumstance exists. A warranty limited to the signatory’s knowledge requires only their personal knowledge. The broader form is harder for the firm to comply with and provides the insurer with more potential defences. Read the wording before signing.
How do I document my renewal disclosures?
Keep a signed copy of the renewal proposal, the underlying internal canvass (emails to partners, file reviews, supervision logs), and any correspondence with the broker about what was disclosed and how. If a dispute later arises, the contemporaneous record is the firm’s defence. Many firms now formalise a pre-renewal “circumstances review” meeting and document the outcome before the proposal is signed.
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About Apex Insurance Brokers Ltd
Apex Insurance Brokers Ltd is a Bristol-based specialist insurance broker authorised and regulated by the Financial Conduct Authority under firm reference number 724952, and registered at Companies House under number 07014570. The firm advises professional services practices across England and Wales on Professional Indemnity, Cyber and related covers. Contact us at info@apexinsurancebrokers.co.uk or on 0117 325 0027.
Last reviewed: May 2026 by Apex Insurance Brokers Ltd.
Important: this article is general information, not advice on your specific circumstances. For advice on PI insurance for your firm, contact us on 0117 325 0027 or info@apexinsurancebrokers.co.uk.